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The Western Australian Industrial Magistrates Court’s (the Court) decision in Simone Jade Stewart v Next Residential Pty Ltd [2016] WAIRC 00756 (16 September 2016) (Stewart’s Case) is a warning for employers to carefully review their current employment contracts, especially for award covered employees who are employed on an “annual salary” in accordance with an award term.

In Stewart’s Case, Ms Stewart was employed as an administration coordinator under the Clerks Private Sector Award 2010 (Clerks Award) and was paid an annual salary of $78,000 per year. According to the contract, the annual salary was intended to be inclusive of “any award provisions/entitlements that may be payable under an award.”

On 28 January 2016, Ms Stewart lodged a claim against Next Residential Pty Ltd (Next Residential) seeking to recover $28,984 for money owed in overtime and lunch breaks that she worked as directed. Ms Stewart further claimed that she was entitled to this money as Next Residential did not comply with the requirements under clause 17 of the Clerks Award, namely that the company did not identify in writing the applicable provisions satisfied by the annualised salary and also did not specify the award that covered her employment.

Next Residential argued that the Ms Stewart was not directed to work overtime or work through her lunch breaks and that this was done on Ms Stewart’s own initiative. In addition, Next Residential submitted that any additional hours worked by Ms Stewart were offset against early finishes, late starts and half days worked. Further, Next Residential submitted that Ms Stewart was paid an annualised salary in accordance with clause 17 of the Clerks Award, that the contract was explicit and intentions were clear that it was inclusive of all the provisions set out and payable under the Clerks Award.

The Court noted that clause 17 of the Clerks Award allows an employer to pay an annual salary in satisfaction of any or all of the following:

• minimum weekly wages;
• allowances;
• overtime and penalty rates; and
• annual leave loading.

Clause 17 also specifies that where an annual salary is paid, the employer must advise the employee in writing of the annual salary and what provisions of the Award are to be satisfied by the payment of annual salary.

The Court found that the employment contract did not identify the applicable award that covered Ms Stewart’s employment. The employment contract also did not advise Ms Stewart of the Award provisions which were to be satisfied by the payment of the annual salary. As a result, Ms Stewart has now been given permission to pursue her underpayment claim against Next Residential.

In this matter the Court found that there is a need to be specific in employment contracts. In particular, employers should:

• identify the award the employee is covered by; and
• (if the employee is going to be paid an annualised salary) identify the specific provisions of the award that will be satisfied by the payment of the annual salary. It is recommended that employers provide a rough monetary estimate for each component.

The Court has made clear that general clauses with regard to the annual salary provisions in the Clerks Award are not enough to satisfy the obligations imposed by the award. Therefore, employers utilising the annual salary provisions of the Clerks Award (or another modern award that provides for annual salary provisions) need to be specific as to what monetary obligations are absorbed to minimise the risk of underpayment claims.

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